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Employees awarded $2M … lawyer blows it day trading

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in Small Business Tax,Small Business Tax Deduction Strategies

An Orange County attorney has agreed to plead guilty to two felony charges after frittering away millions of dollars of his clients’ settlement awards—by placing losing bets on the stock market.

Sandeep Baweja, sole proprietor of Baweja Law Group, was representing 800 real estate agents who sued their employer for denying commissions and other payments.

According to the lawsuit, ZipRealty Inc. denied class members certain sales commissions, refused to reimburse business expenses and made unlawful wage deductions. After filing a class action on their behalf in federal court in May of 2007, Baweja, who is based in Irvine, eventually reached a settlement with ZipRealty.

In March of 2008, ZipRealty paid a $3.55 million settlement—a quarter of which was attorneys’ fees. (Baweja’s share was $660,000.) The balance, approximately $2.5 million, was to be paid on a pro rata basis to the approximately 800 class members, who were current or former real estate agents at ZipRealty.

However, after the money was deposited in a bank account, Baweja set up an online stock brokerage account into which he transferred most of the settlement proceeds. Baweja used the funds to day-trade securities on margin. By December of 2008 the settlement kitty was down to only $55,000.

A chagrined Baweja reported the losses to the court, and law enforcement authorities filed criminal charges.

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